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Green investment to unlock Cambodia’s ‘long-term growth’
Cambodia has the potential to scale up investment in renewable energy and energy efficiency using its abundant solar energy resources, according to observations in the Asian Development Bank’s Asian Development Outlook (ADO) in April 2023.
“Scaling up green investment in priority sectors would help Cambodia unlock its long-term growth potential. The government is committed to pursuing green growth through its National Strategic Plan on Green Growth, 2013–2030 and its Long-Term Strategy for Carbon Neutrality by 2050. Cambodia has the potential to scale up investment in renewable energy and energy efficiency using its abundant solar energy resources,” the outlook, which predicted accelerated growth for Cambodia in 2023 and 2024, pointed out.
In addition, it urged investment in climate-smart agriculture and climate-resilient infrastructure.
“Given the importance of agriculture to Cambodian food security and its potential for commercialization, investment in climate-smart agriculture and natural capital management should be prioritized. Finally, investment in climate-resilient infrastructure will be critical to promoting growth and ensuring long-term sustainability,” the ADB outlook said.
It also suggested that Cambodia must consider climate change while pursuing the country’s economic growth mandate.
“While Cambodia is a low emitter of greenhouse gases, its emissions are rising because of deforestation, expanded rice cultivation, and rising energy demand from industry. Shrinking its carbon footprint would present Cambodia with new growth opportunities given the rising global demand for environmentally sustainable products and services. Transitioning to a net zero economy would also create higher-quality jobs and give Cambodia better access to global investors increasingly interested in green investment,” it said.
Meanwhile, the outlook said that Cambodia’s growth is projected to accelerate this year and, next, be supported by continued tourism recovery, but inflation will moderate.
“Strong export growth and tourism recovery accelerated growth in 2022 and shrank the current account deficit. Inflation peaked in mid-2022 on surging prices for imported goods but decelerated in the second half of the year,” it said.
“Prospects for economies in Asia and the Pacific are brighter, and they’re poised for a strong recovery as we return to normalization following the pandemic,” ADB Chief Economist Albert Park said in a statement.
“People are starting to travel again for leisure and work, and economic activities are gathering pace. Because many challenges remain, governments in the region need to stay focused on policies that support stronger cooperation and integration to promote trade, investment, productivity, and resilience,” Park added.
Analyzing Cambodia’s GDP performance last year, ADB said: “Growth accelerated on solid export and tourism recovery. The economy grew by an estimated 5.2 percent in 2022, led by the rising external demand for Cambodian goods and tourism services. Industrial output grew by an estimated 8.3 percent in 2022. Exports of garments, footwear, and travel goods increased by 39.8 percent year on year in the first half of 2022, and exports of other manufactured goods grew by 38 percent.”
However, exports slowed in the second half as growth weakened in advanced economies. Construction recovered more slowly than expected as demand from foreign buyers declined, dragging down investment in the construction business, it mentioned.
The outlook also noted that the services sector recovered last year.
“After contracting in 2020 and 2021, services finally recovered. Sector growth rebounded to an estimated 4.6 percent in 2022 on tourism recovery that beat expectations and revived demand for food and accommodation, and on growth in local trade, transport, and communications. With improved confidence in travel and the removal of mobility restrictions, international visitor arrivals rebounded from 0.2 million in 2021 to 2.3 million. Recovery in real estate, meanwhile, was softer than expected as construction lagged, as did sales of high-end properties, which go primarily to foreign buyers,” the study observed.
While providing an update for this year, the agency said that the country’s economic recovery would continue despite the weakened external demand. The ADB said that Cambodia’s economy is expected to grow by 5.5 percent in 2023 and 6.0 percent in 2024 for a more robust tourism recovery.
“Growth in garments, footwear, and travel goods is projected to decelerate as demand weakens in the US and Europe. Yet the industry continues to benefit from new trade agreements and policy reform that includes a new investment law to create a one-stop service organization for investors,” the report indicated.
However, industrial output growth is expected to decelerate to 5.8 percent in 2023 before accelerating to 7.8 percent by 2024, adding that the growth in construction is expected to remain slow.
Agriculture is forecasted to grow by 1.1 percent this year and by 1.2 percent by 2024, boosted by crop production for export.
It is also said that service growth will continue to be driven by ongoing tourism recovery.
“Growth in services is forecast to accelerate to 7.3 percent in 2023 before easing to 6.8 percent in 2024. It will be led by the even stronger tourism growth expected following the loosening of Covid-19 restrictions in the People’s Republic of China, Cambodia’s largest tourist market. Other expected boosts to services are Cambodia’s hosting of the 32nd Southeast Asian Games this month, the 12th ASEAN Para Games, and its national election, the outlook added.
Source: https://www.khmertimeskh.com/501282721/green-investment-to-unlock-cambodias-long-term-growth/